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Small Business Outsourcing – What is it, and When a Business Owner Should Consider Outsourcing?

Rachel Present Schreter | Aug 22, 2018

The term “outsourcing” refers to the practice of hiring someone who is not a company employee to provide services that would usually be done within the company. It can be as simple as hiring a cleaner for your office or an accountant to take care of your taxes or as complex as subcontracting a specialty area of a job you’ve been hired to complete. Small business outsourcing can be an expensive headache or it can be an efficient, effective way to help your business grow. To decide if outsourcing is right for you, here are some things to think about:

Benefits of Small Business Outsourcing

Being a business owner means you wear a lot of hats. Sometimes it can feel as if all the running the business keeps you too busy to actually get any work done. Small business outsourcing lets you focus on the part of the job you enjoy. For example, you could put aside a whole day to spend on financial paperwork, or you could send it to an accountant who can finish it in an hour.

Outsourcing is also a great way to grow your business gradually. Let’s say you’re a contractor and you specialize in home renovations. Most of your jobs don’t require a plumber, so you don’t want to hire one full time. Subcontracting to a local plumber will let you take on bigger jobs, instead of being forced to turn them down. Over time, you can take on more and more of those lucrative jobs until they’re most of your business and it becomes worthwhile to have a plumber on staff.

Risks of Outsourcing

However, the benefits of outsourcing for small business are not the whole story. When you outsource, you’re giving a lot of responsibility to someone who doesn’t actually work for you. Your personal information, your reputation, or even just your time can be at risk.

Even the basic financial cost may be higher than you think. Unlike employees, independent contractors don’t get benefits and you aren’t guaranteeing them full-time work for the long haul. To compensate for that, they need to charge more per hour than a salaried employee.

Another risk of outsourcing is that it can be a tempting way to take shortcuts. For example, if you were hiring a full-time, in-house designer for your marketing team, you would expect to pay market value and get high-quality work in return. When outsourcing work, especially over the internet, a lot of business owners tend to make price the primary factor. You can find a designer online who will create a logo for $5, but there’s likely to be a significant difference in quality.

How to Decide if You Should Outsource

So, when should a company outsource? If you want to invest time in growing your company but feel like you and your employees are at maximum capacity, it’s time to consider expanding your team. Whether you choose to do that through outsourcing or by hiring an employee will vary.

If your company is going to stay on the smaller side, you will probably never have enough work to keep a full-time accountant or cleaner. Outsourcing can be a great option. If you’d like to delegate some of your core business (or work that you hope will become your core business) the calculation is more complicated. Try to estimate how long it will take you to build up that side of your business. If you’re confident that it won’t take too long, it may be worth hiring someone as an employee right off the bat. That way you can build loyalty, get to know your new team member, and work out the kinks while the pressure is still off. However, if you think it will take time to grow a new part of your business, or you don’t have the money yet, outsourcing can be a great temporary solution.

How to Start Outsourcing

It takes some practice to learn how to outsource effectively and efficiently. Here are a few important considerations to keep in mind as you get started:

Management

Outsourcing may get you out of some aspects of being an employer but you’ll still need to manage a team and choose who to work with. Make sure to do your research and read up on hiring tips for small business owners.

Payments

Depending on the work you need done, you may be able to outsource abroad and pay less. But often, you get what you pay for. If you want to hire someone local, expect to pay more per hour than you would pay an employee. If you’re only hiring someone temporarily or for isolated projects here and there, it probably still pays off.

Taxes

Unlike an employee, you don’t have to pay taxes for independent contractors. If you outsource to someone abroad, you may be able to avoid even more taxes. Talk to your accountant to find out exactly how much this can benefit you.

Insurance

Whether or not you decide to outsource, subcontract, or hire employees, you will need some insurance. The best choice is an insurance policy that is tailored to fit your precise needs, such as contractors insurance, fitness insurance, or professional beauty insurance. If you decide to outsource rather than hiring employees, that may be all you need in terms of insurance. In any case, it’s a good idea to check local and industry-specific regulations to be sure.

Outsourcing Ideas for Small Businesses

For business owners who are very emotionally invested in their business, it can be hard to see what can be outsourced in a business. Here are a few of the most common areas for outsourcing:

Bookkeeping and Accounting

Outsourcing accounting for small businesses lets you get a professional who won’t miss any of the complicated details and saves you time to focus on working.

Cleaning

Getting a cleaner or cleaning service for your office or workspace is so common that you may not even think of it as outsourcing, but it is.

Marketing

When outsourcing marketing for a small business, you can hire an agency who will take care of the entire process, including strategy and execution. Alternatively, you can hire individual freelancers to take on pieces like design, copywriting, web development, or social media.

HR and Recruiting

A good recruiter can save you a lot of time by gathering and sorting through tons of candidates so you only have to look at the most relevant ones.

General Admin

A virtual assistant can take care of a lot of the small tasks that can add up. You can easily outsource scheduling, billing, data entry, and even correspondence with customers or colleagues.

Outsourcing is just one way to grow your business. While it’s not perfect for everyone, there are a lot of different ways to do it, making it something that you should consider to help you focus on the work you like to do.

Authors

  • Sofya PogrebSofya Pogreb
  • Sanjay BiswasSanjay Biswas
  • Natalie CutlerNatalie Cutler
  • Rachel Present SchreterRachel Present Schreter
  • Guy GoldsteinGuy Goldstein
  • Alon HuriAlon Huri
  • Evyatar SagieEvyatar Sagie
  • Zeke ScherlZeke Scherl
  • Annie RyanAnnie Ryan
Rachel Present Schreter
Rachel Present Schreter | Author
Rachel is passionate about helping small businesses get the tools they need to succeed. Rachel is a marketing guru with years of experience working with tech companies, non-profits and small businesses to ensure that they are reaching the right audiences with their products.

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  • Sanjay BiswasSanjay Biswas
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